June 5 is the day the clock runs out for air traffic controllers union NATCA. That day marks 60 days since the impasse between the FAA and the union over a new contract was thrown into Congress’s lap. Under the personnel reform law passed nine years ago (with NATCA’s support), in exchange for getting the right to bargain over pay, NATCA and the other FAA unions agreed to this dispute-resolution procedure, which was used last year with a different FAA union. The law provides that unless Congress comes up with a different proposal within 60 days, the FAA’s best and final offer goes into effect. As of this writing, no such proposal had been offered, so my guess is that NATCA has gambled and lost.

Instead of realizing that its bargaining efforts were ineffective and coming to a compromise agreement with the FAA, the union gambled that its well-funded lobbying and PR machine would be able to mau-mau its way to subverting the dispute-resolution law. It rounded up the usual suspects to introduce legislation to impose binding arbitration, and cranked up the usual emotional arguments with na—ve lawmakers, reporters, and editorial writers. Allowing the FAA’s final contract offer to be imposed “could put the safety of the flying public in jeopardy,” intoned the union’s favorite GOP lawmakers, Steven LaTourette (R, OH) and Frank LoBiondo (R, NJ). Controllers handed out leaflets at numerous airports, and several newspapers fell for the controllers’ line.

That argument is basically that by imposing draconian terms in the new controllers’ contract, the FAA will accelerate the pace of retirements during the next few years, as more and more of the post-1981 strike cohort reach retirement eligibility. And that will either (a) lead to staff shortages that cause additional flight delays, or (b) jeopardize air safety. While nobody can predict what individual controllers will do, the claim that the new contract will accelerate retirements in highly implausible. That’s because it retains the high salary and benefit levels of the current workforce (and most of the premium pays), while putting in place a new, lower pay scale for new hires. The latter provision is anathema to the union, and that’s what this fight is really about. That provision has nothing to do with compensation of existing controllers, most of whom would have zero chance of finding a new job paying them anything like the $125-150K per year that many of those nearing retirement pull down. Moreover, the FAA points out that those retiring early would not only forego several years of salary and benefits but also reduce their future pension income.

It’s essential that the FAA’s Air Traffic Organization get control of its budget, especially its payroll (under which average controller compensation has increased 68% over the past six years). The soaring operations budget has increasingly starved the budget for investing in modernization of the ATO’s aging facilities and equipment. That’s where the real danger of increased delays and decreased safety comes from.

On at least a half-dozen occasions during the last few months, when I’ve talked up the exciting plans for the Next Generation ATC System being ginned up by the multi-agency Joint Planning & Development Office, the response has been skeptical raised eyebrows and concern that NGATS is still just a bunch of ideas, not a well-defined plan that can be implemented. “They don’t even have any idea how much it will cost,” I kept hearing.

Well it looks as if the latter complaint can be put to rest, thanks to the work of the FAA’s Research, Engineering and Development Advisory Committee. At an invitation-only forum last month, REDAC head Gerry Thompson presented the results of its financing working group (known by the horrible acronym of FNGATSWG, which I challenge you to pronounce). The bottom line is that, over the next 20 years, it’s going to take about a billion dollars a year more than FAA now spends to implement the new system while continuing to operate the old one until the new one is fully operational. That number assumes that the ATO can save about $500 million a year (including the projected $200 million/year thanks to the new outsourcing of Flight Service Stations). If those economies are not all realized, the cost would be proportionally higher. So figure at least $25 billion.

The REDAC report notes that, although it modeled a Status Quo scenario alongside the NGATS phase-in scenario, the former will not have enough capacity to meet projected demand, so its inclusion was simply to provide a baseline for comparison. It also notes that NASA, which has done some of the most important recent research on next-generation ATC concepts and technologies, has recently cut back and changed the focus of its aeronautical research, leaving another $100 million per year that FAA has to somehow find to replace these efforts.

How to fund this ambitious program? The report lays out the options, including more money from general taxpayers, increased rates of current aviation taxes, or a shift to user fees and bonding. It also points out the essential requirement for “20 years of consistent and stable funding, management, and oversight to be successfully and efficiently completed.” When you look at how the FAA’s capital budget (called “Facilities & Equipment”) has bounced around over the past 15 years (oscillating between $2.4 and $3.4 billion, in real terms), it’s hard to square that with the requirement for consistent and stable funding.

Far more reliable would be the course taken by Australia, Canada, Germany, the U.K. and many other countries that have converted their ATC operations into self-supporting corporate entities, able to issue long-term revenue bonds based on their user-fee revenue streams. With a board of directors representing aviation stakeholders, a commercialized ATO would provide the leadership, stable revenues, program planning and management, and oversight (to users and bondholders) that the REDAC report spells out as the “engines for success” in implementing the next-generation system.

Almost completely unnoticed, even by the aviation press, was a May 9th news release announcing that the FAA has competitively selected Sabre Airline Solutions to develop and implement an automated system for scheduling air traffic controllers. The first site to be implemented will be Kansas City, starting this summer. The initial contract is for $200,000, but could be worth up to $20 million over the potential full term of the agreement.

You may recall previous stories in this newsletter about out-of-control TRACONs in New York and Dallas, which got considerable press coverage last year. One of the symptoms in those and similar situations was massive overtime, which came about when the union got control of scheduling. One FAA manager tells me that at problem facilities, memoranda of understanding (MOUs) were agreed to (by the previous Administrator) that allowed NATCA to develop the biweekly work schedules. “Controllers would have their NATCA buddy/scheduler develop sweetheart schedules that were more to the benefit of the controller than the customer. Gaps in coverage were filled with overtime at about $100/hour. Controllers started to show up for work when it suited them, rather than when the traffic demanded it.”

Those MOUs are history now, and the new automated scheduling contract is the next step in regaining control. The idea is to develop schedules that optimize the use of expensive controller time, matching bodies on duty with projected real workload. That should prevent situations like what one tower controller tells me is common at his facility—on evening shifts, controllers may handle as few as eight planes in two hours, yet two positions are staffed up simply because the people are there.

This may seem like small-potatoes stuff, but when you’re talking about $130K/year people sitting around waiting for traffic to control, these things really add up.

In the upcoming battle over whether to shift ATC funding from aviation taxes to direct ATC user fees, the business aviation community will argue that such a shift will be the death knell for vitally important business aviation, because it will increase the cost of owning and using turboprops and business jets. In a forthcoming Reason policy study, I examine this claim in some detail.

But in advance of that study’s release, let me cite a few reasons that should lead you to take these claims with a large grain of salt. The first piece of contrary evidence comes from fuel prices—not a trivial component of the cost of flying. Turbine fuel (Jet-A) has soared in price over the last few years, in parallel with the price of gasoline for your car. Yet business aircraft sales are at an all-time high. An April 28, 2006 news release from the General Aviation Manufacturers Association (www.gama.aero) reported that business jet shipments in the first quarter of the year increased 36 percent from a year ago. Overall general aviation aircraft billings totaled $4 billion for the quarter, the highest in the industry’s history (and a 40% increase over last year’s first quarter). Obviously, this does not prove that a very high user fee would do no harm, but it clearly calls into question the business aviation organizations’ mantra that any sort of user fee would devastate the industry.

The second pieces of evidence come from Europe. That continent is the poster child for general aviation horror stories, mostly along the lines of how ATC user fees and restrictions on airspace access make U.S. type recreational flying prohibitively expensive and inconvenient. From what I’ve seen, I would not want to be a Cessna 172 operator in Europe, either. But business aviation is a different story, it seems. Warren Buffett, whose company owns NetJets, told shareholders in February that NetJets increased its European fractional ownership business by 37% last year. The company also has a successful relationship with Lufthansa Private Jet, providing the small corporate jets that Private Jet uses to link business travelers to cities across Europe from Lufthansa’s hubs in Frankfurt and Munich. And the very light jet (VLJ) air-taxi concept is happening in Europe, too. Last month saw the launch of JetBird, Europe’s first on-demand VLJ air taxi service. Using the new Embraer Phenom VLJ (JetBird has 50 on order, plus 50 options), the service will begin in Switzerland and branch out from there.

These examples demonstrate that ATC user fees are an affordable part of business aviation in Europe. In fact, they reinforce the point repeatedly made by the National Business Aviation Association about the vital role played by business aviation in a modern economy. It’s not a fragile, infant industry that could be blown away by a modest increase in direct operating costs, if that’s what a switch from taxes to user fees would bring about.

There was disappointment all around several years ago when the FAA drastically cut back funding to develop LAAS (Local Area Augmentation System).

The basic idea was to provide ground-based signals to augment the locational information provided by GPS satellites. With augmentation, the GPS signals would be accurate enough to use for precision landings. One LAAS would enable precision approaches from all the runway ends at an airport, while with ILS, each runway end needs its own ILS gear. And the cost of adding LAAS to an airport was estimated to be less than a single ILS. What a great way to expand the functional capacity of airports, many of which have ILS on only some (or none) of their runway ends.

FAA was aiming at providing the most advanced precision-landing capability (Cat. 3) with LAAS, but when contractor Honeywell had difficulties demonstrating that the prototype could meet the integrity requirements for Cat. 3, the FAA downgraded the program to a relatively low-level R&D effort.

Meanwhile, the more entrepreneurial Airservices Australia, one of the new generation of commercialized air navigation service providers (ANSPs), has teamed up with Honeywell to develop and market a commercial version with Cat. 1 capability. Called GBAS (ground-based augmentation system), it will augment both GPS and the forthcoming European Galileo satellite signals with VHF signals transmitted to planes on approach. The initial market is the thousands of runways worldwide that lack Cat. 1 capability. Airservices will market the system in the Asia-Pacific region, Africa, and the Middle East, while Honeywell will do likewise in North and South America and Europe. Airservices will use the system nationwide in Australia, as part of its plan to shift to satellite-based ATC. Those plans include large-scale deployment of ADS-B and another augmentation system, GRAS (Ground-Based Regional Augmentation System) also being developed with Honeywell.

Will we ever see full Cat. 3 capability LAAS (or GBAS) in this country? One approach to meeting those requirements is to combine GBAS with onboard synthetic vision. That is currently being explored by the Radio Technical Committee for Aeronautics (RTCA). Sooner or later, something like this will pass muster, hastening the day when we can shut down aging ILSs and 20th-century radar systems.

Military ATC and Privatization. The U.K’s part-privatized air navigation service provider National Air Traffic Services (NATS) has signed a 15-year, $1.36 billion contract with the U.K. Ministry of Defense to provide ATC services to the military. The agreement continues an existing arrangement under which military controllers work out of NATS en-route centers at Prestwick, West Drayton, and Swanwick. Over time, the military controllers will be phased into using the same flight data processing system used by NATS’ civilian controllers, permitting U.K. airspace to operate as a single entity.

Stakeholder Board for Europe’s Next-Generation System. Europe’s counterpart to our JPDO is the Single European Sky ATM Research program (SESAR), under which major aerospace firms, ANSPs, and other key players (numbering more than 30) are planning Europe’s next-generation ATM system. To manage this effort, SESAR has created a stakeholder board, with pre-defined weighted votes on key issues. As Aviation Week (May 8, 2006) reports, on ATM design, airline users get four votes, ANSPs three, airports two, and industry suppliers one. I’m glad to see another example of the stakeholder board principle, which we need to apply in this country to a commercialized ATO.

ATO and Russ Chew Join CANSO. It may be a bit of “the wish is the father of the man,” but in advance of its commercialization, the FAA’s Air Traffic Organization (ATO) has become a full member of the global organization for commercialized ANSPs, CANSO (Civil Air Navigation Services Organization). Not only that: ATO chief Russ Chew has been elected to membership on CANSO’s executive committee. Our hearty congratulations to Russ and ATO! Now if only Congress will get with the program and make ATO’s commercialization a reality.

Quotable Quote. “By forcing the FAA to rely on users who have deeply rooted self-interest, the airlines’ approach [shifting ATC funding to user fees] would force the FAA into limiting services its customers do not value, such as the rapidly aging and expensive infrastructure system of traditional navigational aids that create fixed airways. It could instead force it to turn to reliance on more modern flight-management systems, aircraft-to-aircraft (ADS-B) and satellite navigation systems that are already on most airliners. This would compel the FAA to move toward the next stage of navigation, just as a 1980s revolt by general aviation helped push the agency toward the satellite-based global positioning system.”
-Editorial, “The Value Hunt,” Airline Business, April 2006.

Robert Poole is director of transportation policy and Searle Freedom Trust Transportation Fellow at Reason Foundation. Poole, an MIT-trained engineer, has advised the Ronald Reagan, the George H.W. Bush, the Clinton, and the George W. Bush administrations.